Hard Landing (44 page)

Ferris was aware that he could not count on all or even most of his pilots to stick by him. The cornerstone of his strategy to fly through a strike involved a corps of strikebreaking pilots, some 570 strong, who were now in Denver being trained in United’s operations, aircraft, and procedure. They would keep the airline aloft at a level sufficient to keep the cash flowing. In the beginning United would fly at
50 percent of capacity, Ferris estimated. Then, if the pilots refused to relent, United could creep back to its full schedule of 1,550 flights a day over several months by hiring and training new pilots. By that time, if the strike had gone on that long, Ferris would have destroyed the union that had betrayed him.

The pilots’ union too recognized that those 570 pilots controlled everything. Shutting down only half of United was insufficient. If hundreds of scabs reported to work, the will of the strikers would erode almost instantly. Each of those intended scabs had to be convinced not to perform the job for which he had been hired.

United was
lodging the strikebreakers at two hotels near the company’s training center in Denver, where they had plenty of time on their hands. An ALPA leader named Jamie Lindsay (once described by ALPA’s international president as “a
nuclear reactor without enough water”) led the countertraining effort. He ran union hospitality suites in the company’s hotels, right under Ferris’s nose. He arranged for carry-out pizza by the dozens and beer by the case for fraternal meetings with the intended scabs. Little was spared in the way of moral suasion and professional pressure.

There was another element, more discreet, in the campaign to keep the newly hired pilots from crossing. Some of the pilots who had been hired to train the strikebreakers were themselves on strike—at Continental Airlines. From the outside it appeared a case of union hypocrisy, strikers training strikebreakers. But Continental strikers were acting as
double agents, a kind of fifth column within United. Some, when they weren’t conducting sessions on flap settings and engine speeds, were making small talk—about what Lorenzo had done to the pilots at Continental, about the ideology of the confrontation at United, about the importance of refusing to fly the very equipment that the recruits were being trained to operate.

Ferris’s advisors told him that everything was ready, the troops were at hand, United could break the strike. Ferris in turn gave the same report to his board of directors. In a vote of confidence they came squarely behind Ferris, with one exception. Wally
Haas, the former chairman of Levi Strauss, expressed reservations about taking the strike; it would obviously create hard feelings, and hard feelings were the last thing management needed in a service business. Before long Haas would quietly leave the United board of directors.

Ferris was still at corporate headquarters at 11
P.M.
, the hour the strike had been scheduled to begin. At 11:01 he was told the pilots were walking. For only the second time in history and for the first time since 1951, the United pilots were on strike.

The dimly lit operations center had been geared up to operate the
company at 50 percent of capacity. But as midnight passed, then the wee hours, the horror began to spread and then took hold.

Where were the replacement pilots? Five hundred and seventy had been trained.
Six showed up.

The flight attendants also failed to show up for work.

Even about
30 management pilots refused to cross the picket lines.

United struggled to get what little in the air it could. Fifteen percent of the operation was all it could muster. Ferris was stunned and so were thousands of airline passengers. The world’s finest air transport system was suddenly in one of its worst snarls ever. On a typical day United boarded about 130,000 passengers, more than one out of every six people flying in America. Its flights linked 157 cities in all 50 states. Hawaii might as well have been a wholly owned subsidiary of United. Now passengers who had been assured that United would be operating its most important flights found themselves high and dry.

American—the reason that Ferris was taking this strike—was the greatest beneficiary in dollar terms. Every American flight was departing O’Hare crammed from stem to stern. A day into the strike American carried a record 152,000 people, on a Sunday. The strike was a godsend to Bob Crandall’s efforts to make American a powerhouse number two against United at O’Hare. To get long-lasting benefits from the United strike, American even set up folding tables at the airport to recruit United passengers as members of the American frequent-flier program.

Crandall’s people were certain, in any case, that the strike would go on for some time. Crandall’s analysts had sent the computers into overtime, running pro forma estimates of the financial effects of the strike not only on American but on United. The cost incurred by United in the first five minutes of the strike, Crandall’s people determined, was so great that Ferris would have to hold out until he got what he wanted.

The emotionalism of the strike preparations did not let up once the pilots were picketing and the planes were grounded.
Twenty-four-hour security went up around the Ferris home in the northern Chicago suburb of Northbrook. The strikebreaking pilots—what few there were—were horribly harassed. Some of their wives received
threatening calls. Some of the working pilots found feces in their flight bags.

Some of the striking pilots would later claim that at various points Ferris went off the deep end himself. A pilot named John Vick testified that he ran into Ferris in Denver and was bowled over to hear Ferris explain, “
I am the chairman. I have all the chips. I am a 1,300-pound gorilla!” Union leader Jamie Lindsay claimed that when he too came across Ferris in Denver, Ferris said, “Why don’t you travel
back to the Dumpster you live in?” (The comment caused ALPA to distribute lapel buttons picturing trash receptacles.)
Ferris would later deny ever making such comments, but there was plenty of bravado in Ferris’s stance. “
ALPA can’t win,” the
Chicago Tribune
quoted him as saying. “There’s no sympathy out there for the pilots.”

But ultimately there arose the issue of cash, which can make even the sturdiest CEO weak in the knees. This affliction hit Dick Ferris on about the seventh day of the strike. Watching cash fly out the window at a dizzying pace, he
called his senior managers together and said he was going to settle on the terms last agreed to by the union. B-scales would be established, but only for a brief period. Ferris had nowhere near the deal that Bob Crandall had.

Like Frank Borman’s aides at Eastern in the similar circumstances there, Ferris’s people were shocked and dismayed. We’ve come this far, some of them thought. Why not go 60 or 90 days? But Ferris was intent on settling.

In the end, Ferris got the worst of both worlds—a long strike
and
a lousy settlement. The circumstances of the walkout had created some thorny back-to-work issues, intensified all the more by the emotions running out of control on both sides. In a decision that seemed calculated principally for punishment, United said that those few pilots who had scabbed through the strike would get “super seniority,” jumping ahead of those who had struck. In an equally insulting move the union demanded job protection for the nearly 570 strikebreakers who had snubbed the company that hired them.

For another three weeks the strike raged on, driving more passengers from the company, deepening further, if that was possible, the enmity between Ferris and his most important employee group. A number of board members were upset that after the divisive economic issues had been resolved, Ferris continued to irritate the pilots
over back-to-work issues. “That was putting a match in a
tank of gasoline,” as senior director Chuck Luce later put it. The National Mediation Board ultimately proposed the Solomon-like solution of letting a court resolve the ancillary issues, but only after weeks’ more hatred had accumulated.

On June 6, 1985, after not quite a month, United was back in business. It was a changed United, certainly from the vantage point of marketing chief John Zeeman. Though devoted to Ferris, Zeeman could see how grave the damage had been. “That was
not a strike we won,” he would say years after leaving United. “It was the worst thing to happen to the company in 50 years. Emotionally, we never came back.… Before the strike we were the greatest airline in the country, maybe the world. Afterward, we weren’t.”

One of the least welcome effects of the strike was its depressing influence on United’s stock. This was the precise midpoint of the 1980s, when the takeover epidemic was intensifying. A low stock price on even the biggest corporations was like a blue light twirling in the ceiling of a dime store, an advertisement to the likes of Carl Icahn or Boone Pickens or Sir James Goldsmith or Ivan Boesky or Donald Trump or for that matter, Frank Lorenzo.

United was an inviting target in another respect. Unlike Pan Am, which had been raiding its pension plans to keep afloat, United had been overfunding its pension accounts—or so Dick Ferris was told by his advisors on Wall Street. Ferris, they thought, would be wise to deplete the retirement funds of excess cash so that a raider did not try to seize the company and use United’s own cash to help pay for the deal.

But what could he do with the money?

Ferris placed a call to Frank A. Olson, the chairman of Hertz. Olson was a salesman’s salesman and sports enthusiast; he had signed O. J. Simpson, in the 1970s, to one of the earliest and most productive sports celebrity endorsement contracts. Ferris too was a longtime acquaintance. Olson knew all the airline bosses because of the frequent marketing tie-ins between their industry and the rental car business. Olson and Eddie Carlson had been close for years, and all three men—Olson, Carlson, and Ferris—shared a passion for golf.

“We’re sitting on a
pile of cash,” Ferris told him, cash that had to be spent. “I want to buy Hertz.”

Hertz, however, was not at the moment Olson’s company to sell, having become one of the far-flung subsidiaries in the portfolio of RCA Corporation. Soon Ferris was in contact with Thornton Bradshaw, the chairman of RCA, to make the pitch to him, and Bradshaw bit. For $587 million, Hertz, the world’s leading rental car agency, was United’s.

Although there was no shame or embarrassment in conducting defensive acquisitions in the 1980s, Ferris would forever refuse to acknowledge the Hertz purchase as an antitakeover measure, not even to the members of his inner circle. For everyone but Frank Olson, Ferris had a different explanation, one that Ferris pushed so hard it took on a life of its own, inside United and outside. Ultimately the cover story became the reality.

The acquisition placed United squarely into a third major sector of the travel and tourism business, on top of Westin Hotels and United Airlines itself. If properly stitched together, these three businesses, Ferris told his associates, could become something extraordinary—an integrated travel empire on a scale never before seen. The pièce de résistance, the glue that would bind it all together, would be Apollo, United’s sprawling computer reservation network. Apollo could take the three separate businesses and assemble them into a single product, that product being a trip, a seamless travel experience, arranged in a single phone call and carried out with unheard-of efficiency and convenience. You could complete your rental car contract and check into your hotel at the United counter at the beginning of your journey. Your luggage could be delivered directly to your Hertz car. Apollo would know that you wanted an aisle seat in the smoking section (they still existed then) and a midsized sedan and a room on the concierge floor. And you could pay for everything on a single credit card imprint. Ferris’s people threw themselves into the job of endowing Apollo with such intelligence.

But to legitimize his global travel empire Ferris needed two additional things. The first was a much bigger hotel operation, including hotels overseas—particularly in Asia, now that he controlled the vast Pan Am routes there. Ferris went shopping and quickly bought the Hilton chain in late 1986, for nearly $1 billion.

The other thing he needed was to reach into Europe, by tying in key United flights with those of a European airline while simultaneously extending the reach of the Apollo reservations network. That way passengers in Europe could be directed toward an airline friendly with United, which, in turn, would turn them over to United for their connecting flights in the United States, where they would drive in Hertz cars and lodge at Westin or Hilton hotels.

One night, in their search for strategic partners in Europe, Ferris boarded a British Airways flight to London with United marketing chief John Zeeman. When they
landed in London they raced to a breakfast meeting with Colin Marshall, chief executive of British Air. Following breakfast they jumped into a chartered plane to Cologne, Germany, where they were whisked past German customs and into a luncheon meeting with Heinz Ruhnau, head of Lufthansa. Soon they took off again in the chartered plane, this time for Paris, where they held a dinner meeting with the people from Air France. And when their whirlwind tour was concluded, Zeeman and Ferris realized that by having breakfast with the British, lunch with the Germans, and dinner with the French, they at least had planned their meals well.

As Ferris moved to fulfill his vision there was grumbling inside United, and not just from the pilots.
Ferris’s own managers urgently wanted more planes to meet the attack from American in Chicago, more planes to fight Continental in Denver, more planes to throw against People Express, growing like a weed everywhere.

But Ferris, the pilot, was thinking less and less about airplanes. He still had the number one airline, and on top of that the number one car rental outfit and the number one hotel chain in the world. As he later put it, “We were ready to
own the world.”